Why Lean Startup The article you are about to read was originally written by Steve Blank and published by Harvard Business Review in May 2013 with the original title: Why the Lean Start-Up Changes Everything . The translation of the content aims to provide a privileged view of the new economy, innovation and how different countries perceive the terms and concepts presented. Enjoy reading!
Launching a new company—whether it’s a tech startup , a small business, or an initiative within a large corporation—has always been a make-or-break proposition. According to the decades-old formula, you write a business plan, pitch it to investors, assemble a team, introduce a product, and start selling as much as you can. And somewhere along the way, you’re likely to suffer a fatal setback. The odds are not on your side: As research by Shikhar Ghosh of Harvard Business School shows, 75 percent of all startups fail.
The Perfect Business Plan Fallacy
Conventional wisdom has it that the first thing europe cell phone number list founder should do is create a business plan—a static document that outlines the size of the opportunity, the problem to be solved, and the solution the new venture will provide. It typically includes a five-year forecast for revenue, profits, and cash flow. A business plan is essentially a research exercise written in isolation at a desk before an entrepreneur even begins building a product. The assumption is that you can figure out most of the unknowns of a business up front, before you raise money and actually execute on your idea.
Product developers then invest thousands of hours of work to get the product ready for launch, with little or no customer input. Only after the product is built and launched does the venture get substantial customer feedback—when the sales force tries to sell it. And often, after months or even years of development, entrepreneurs learn the hard way that customers don’t need or want most of the product’s features.
Sketch your hypotheses
The business model canvas allows you to see all nine building blocks of your business on one page. Each component of the meet softline’s cloud management solution model contains a series of hypotheses that you need to test.
After decades of watching thousands of startups follow this standard regime, we’ve now learned at least three things:
- Business plans rarely survive the first contact with customers. As boxer Mike Tyson once said about his opponents’ pre-fight strategies, “Everybody has a plan until they get punched in the mouth.”
- No one but venture capitalists and the former Soviet Union demands five-year plans that provide for complete unknowns. These plans are usually fictitious, and imagining them is almost always a waste of time.
- Startups are not smaller versions of large companies. They don’t evolve according to master plans. The ones that ultimately succeed quickly navigate failure after failure, all the while adapting, iterating, and improving their initial ideas as they continually learn from customers.
One of the critical differences is that while existing companies execute a business model, startups pursue one. This distinction is at the heart of the lean startup approach. It shapes the lean definition of a startup: a temporary organization designed to pursue a repeatable and scalable business model.
The lean startup method has three key principles:
First, rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses—basically, good guesses. So instead of writing a complicated business plan, founders summarize their hypotheses in a framework called a business model canvas . Essentially, this is a diagram of how a company creates value for itself and its customers.
Listen to customers
During customer development, a startup searches for a business model that works. If customer feedback reveals that its business australia database directory are wrong, it revises them or pivots to create new hypotheses. Once a model is proven, the startup begins executing, building a formal organization. Each stage of customer development is iterative: a startup will likely fail several times before finding the right approach.
1. Founders translate company ideas into business model hypotheses. Test assumptions about customer needs, and then create a “minimum viable product” to test the solution on customers.
2. The startup continues to test all other hypotheses and tries to validate customer interest through pre-orders or product usage. If there is no interest, the startup can “pivot” by changing one or more hypotheses.
3. The product is refined enough to sell. Using its proven hypotheses, the startup creates demand by rapidly increasing marketing and sales spend and scaling the business.
4. The business transitions from startup mode, with a customer development team looking for answers, to functional departments executing its model.
Rapid and responsive development
In contrast to traditional product development. Where each stage occurs in linear order and lasts months. Development builds products in short, repeated cycles. A startup produces a “minimum viable product. Containing only essential features—collects feedback from customers. Then starts over with a revised minimum viable product.